How grants can help take your business to the next level

Starting your own business is not easy, often taking months or years of planning just to get ready to launch. Developing a product that has a unique selling point can take a long time and will often involve research and development to perfect the product offering. To do this often requires investment to fund the process.

There are several ways to raise capital for a business venture. If you’re fortunate enough to have savings that you can invest, then this is the ideal solution as you retain full control of the business. However, not many people have thousands of pounds, ready to invest in a business venture, so they’ll often look elsewhere for investment.

The most commonly known route is to get a bank loan to fund your business venture. However, this comes with a certain amount of risk as the loan will have to be paid back and the interest rates can be quite high. It’s also not a great time to go down this route as Covid-19 is forcing banks to be more cautious with their lending, making it increasingly difficult to even secure a bank loan.

Another option is to give away equity in your business in return for investment. Again, this can be an effective way of securing finance for your business venture if you can’t fund it yourself. However, it means you will have to give away a stake in your business. This means not only do you have to report to an investor and share any profits, but you could also have an active shareholder who will have a say in the strategy and direction of the business, meaning you may lose some control of big strategic decisions by having other investors onboard.

However, there is another option, business grants.

What are business Grants?

A business grant is a sum of money awarded to a business by the Government, The European Union, charities, or other organisations for a specific purpose. The benefit of a grant is that it is given to a business without having to give away equity or pay the grant back, meaning it can be a great way to fund the launch of a business venture.

As always with these things, it’s not as simple as being given ‘free money’; grants often come with a set of guidelines on what the money can be spent on, depending on who is providing the money. This means that it’s important to carefully analyse the rules for each grant to see which is most appropriate for your business idea. Grants can vary in value from £25,000 to £10 million, but due to the obvious benefits involved they are highly competitive, and the application process can be intense. If you are successful in the application, it is a great way to secure investment which can fund your business without having to give away equity or pay back the loan.

Is there a catch?

There isn’t a specific catch to business grants, you really can get money to invest in your business without having to pay it back or give equity. However, it’s important to be aware of the eligibility criteria for a grant and what the restrictions are for spending the money.

For example, it’s unlikely you’ll secure a grant to upgrade your office or buy a new pool table, but if you are looking to secure investment to launch, scale or diversify a business, a grant can be a great option. There are also some restrictions on grants; applying for one may affect your chances of applying for another in the future so it’s vital that you make sure to choose the right one to from the offset. It is also important to look at the long-term strategy of the business to make sure you don’t damage the future objectives of your business.

Another thing to note is that grants can potentially impact your ability to reclaim R&D tax credits. Some grants are considered state aid which will then impact your ability to apply for state funded R&D tax credits. A common misconception is that you can’t have both, but this is not the case. It is possible to combine grants with R&D tax credits, but the rules and regulations are very complex. It’s advisable to speak to an expert who can help you sort it out and avoid falling foul of the rules. Getting an expert onboard early in the process can also help maximise the number of options available for you and to maximise your funding opportunities.

How do I apply for a grant?

The grant application will vary depending on the body who is funding it, however there are several useful websites to identify grant opportunities. Innovate UK is the organisation responsible for Government funded grant opportunities.

Grants are a great opportunity to receive funding for a business venture, however there are lots of details that need to be considered to make sure you choose the right one for your business. We have written a useful article going into more depth on everything you need to consider before applying for a grant. It’s important to make sure you take some time to evaluate the pros and cons of each grant opportunity before applying or seek professional advice to assist you with the process.